Impact Investing: The Billionaires Building Change

leven years ago, at a small gathering at the Rockefeller Foundation’s Bellagio Center in Italy, the term “impact investing” was coined. It was not a new idea, but it finally had an official name. Since then, many financial firms and investors have embraced the term and invested in companies and funds that not only make money but have a measurable, positive social or environmental impact. At least $228 billion is at work in such initiatives, according to the Global Impact Investing Network. Meet billionaires who are leading the way.

This year the Facebook cofounder’s Good Ventures invested $14 million in the Dementia Discovery Fund, joining Bill Gates. It has also backed efforts to reduce humans’ carbon footprint, such as its 2016 bet on startup Impossible Foods, which develops plant-based meat.

For Doerr, impact investing means backing “extraordinary” entrepreneurs who can change the world at scale. The venture capitalist at Kleiner Perkins focuses on five areas of need: education, healthcare, energy and climate, poverty and leadership, backing everything from teachers’ app Remind to fuel-cell company Bloom Energy. “For me, the impact is the more important return than the financial one,” says Doerr, whether it’s lives saved or carbon taken out of the climate. But he still expects to make three to five times his investment.

His Quicken Loans mortgage company anchors what he calls a family of “for-more-than-profit companies.” By committing some $5.6 billion to real estate in downtown Detroit and Cleveland that others had fled, he says he's creating jobs and strengthening the community, which translates into better opportunities for all. He's also supporting the growth of entrepreneurship in Detroit.

“The most satisfying part of this is making an old city become vibrant with people working,” Hendricks says of Beloit, Wisconsin, a community of 37,000 people. The industrial town was left with a hole after Beloit Corp., which employed 1,200, closed down in 2000. Hendricks stepped in 9 years ago, hoping to provide jobs and turn a profit. She converted the old paper-machine maker’s campus into a startup hub that houses over 35 firms, with a total of 1,000 employees. She has also repurposed other properties, creating a convention center, a country club, hotels and restaurants, which added over 300 jobs to the town.

The Salesforce CEO and his wife, Lynne, have made a few impact investments between $100,000 and $1,000,000 based on their own diligence. Examples include Carrot, which makes an FDA-cleared carbon monoxide breath sensor with a smartphone app to help people quit smoking, and New Wave Foods, which makes algae-based shrimp to reduce the harmful impact of seafood production. The Benioffs expect a 30% compound annual growth rate from these investments.

A principal theme behind Skoll’s impact investing is a bet on companies that are working to combat climate change. Aiming to reduce carbon emissions, Skoll’s Capricorn Investment Group was an early venture investor in electric-car firm Tesla. It’s also backed battery company QuantumScape; Joby Aviation, which is pursuing electric- powered aviation; and Saildrone, which has a fleet of small autonomous sailing vessels that measure temperatures, salinity and more. Read More

Cook and his wife Signe have put nearly $7 million into venture capital funds like Reach Capital that invest solely in education technology companies. They invested another $25 million in nine companies, mostly with a focus on education for underserved and low-income communities, including ParentPowered, which aims to increase the literacy and development of children by texting parents tips to incorporate into their daily routine.

Pritzker was among the first to invest in so-called social impact bonds, which pay out to investors if certain results are achieved. Pritzker has financed preschool for thousands of low income children in Utah and Chicago via the bonds, with returns based on how many children move on to kindergarten without needing costly special education. “I always thought early-childhood education had one of those terrific return profiles for taxpayers,” Pritzker told Forbes in 2015, adding that he wanted the bonds to become a fixture in people’s 401(k)s.